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BUILDING MATERIALS: PATHWAYS TO EFFICIENCY IN THE SOUTH ASIA BRICKMAKING INDUSTRY

THE CARBON WAR ROOM JOHNS HOPKINS UNIVERSITY SAIS

AUTHORS: ALEXANDER LOPEZ, NATALYA LYODA, RACHEL SEGAL, AND TONY TSAI

EDITORS:THE CARBON WAR ROOM RESEARCH TEAMMATTHEW CULLINEN AND HILARY MCMAHON

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RESEARCH REPORTNOV. 2012

02

WWW.CARBONWARROOM.COM

EVALUATING THE BRICK INDUSTRY IN SOUTH ASIA

The Potential for Emissions Reduction and Investment in Efficiency Technologies for the Asian Brick Industry

Contributing Authors:Analyst Team: Alexander Lopez, Natalya Lyoda, Rachel Segal, and Tony TsaiThe Johns Hopkins University Paul H.NitzeSchool of Advanced International Studies (SAIS)

© Carbon War Room, 2012This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made.

No use of this publication may be made for resale or for any other commercial purpose whatsoever without express written consent from Carbon War Room.

Report by:The Carbon War Room Research TeamMatthew Cullinen and Hilary McMahon

Design: www.grahampeacedesign.comAll images: Associated Press


03CARBON WAR ROOM RESEARCH REPORT – 2012CARBON WAR ROOM RESEARCH REPORT – 2012

ContentsEXECUTIVE SUMMARY 04BRICKMAKING PROCESS 06

Moulding & Mechanisation Firing Kiln Technology

INDUSTRY EMISSIONS PROFILE 08CO2 Emissions Emissions from Different Kiln Technologies Particulate Emissions from Different Kiln Technologies

KEY MARKETS 10India China

MARKET TRENDS 12Labor Brick Quality Land Ownership Regulation Future Trends

REDUCING EMISSIONS 14Kiln Switching Benefits of VSBKFiring Process Changes Resource-Efficient Bricks (REBs)

INVESTMENT OPPORTUNITIES 16Clamp to VSBK BTK to VSBK Firing Process Changes Non-Financial Considerations

CHALLENGES & SOLUTIONS 18Strategy 1: Kiln Switching Strategy 2: Zig-Zag Firing Strategy 3: Resource Efficient Bricks (REBs) General Solutions Sustainability Knowledge Sharing

CONCLUSION 22WORKS CITED 24ANNEX I: Financial Analysis of Kiln Switching from BTK to VSBK 25

ExecutiveSummary

04



From the coal consumed, the brick

industry in the top five Asian brick-producing

countries emits 1.2% of total global anthropogenic CO2

emissions


05CARBON WAR ROOM RESEARCH REPORT – 2012

sia produces approximately 1.2 trillion bricks per year (Heierli & Maithel, 2008). The global brick industry is a major source of carbon dioxide (CO2) emissions. This does not include any of the other inputs used during the brick production

process or the diesel required to transport the bricks. Just from the coal consumed, the brick industry in the top five Asian brick-producing countries emits 1.2% of total global anthropogenic CO2 emissions.1 Brick kilns are significant emitters of black carbon, which is known to contribute to climate change and local health problems. Black carbon and suspended particulate matter (SPM) are the second-largest contributors to global warming after CO2. More than 2.4 million premature deaths can be attributed to black carbon every year (Baron et al., 2009).

Significant emissions reductions can be achieved through a portfolio of solutions, specifically kiln switching, improved firing processes and dissemination of resource-efficient bricks (REBs). Despite the challenges of scaling-up emissions-reducing technology, this report identifies a series of opportunities for energy investment, knowledge sharing and potential partnerships in the brick industry.

Brickmaking ProcessIn Asia, brickmaking is both energy and Labor intensive. The kiln technologies used can be divided into intermittent and continuous kiln types. Clamp kilns are the most commonly used in South Asia and are the most energy intensive. Bull’s trench kilns are the primary kiln technology used by large-scale manufacturers. Vertical shaft brick kilns (VSBKs) are the most energy-efficient kiln technology but have not been widely adopted throughout South Asia.

Emissions ProfileThe brick industry in Asia produces more than 1.2 trillion bricks per year. The largest brick manufacturers are China, India, Pakistan, Bangladesh and Vietnam. The brick sector also emits large volumes of black carbon and other suspended particulate matter (SPM). For example, India’s brick sector is the third-largest industrial user of coal.

Market AnalysisThe two largest brick producing countries in Asia are China and India. Given their market size, these nations have the greatest emissions reduction potential. However, the Asian brick industry is particularly resistant to change because of four interconnected factors: Labor patterns, brick quality, government regulation and land ownership rights.

Reducing EmissionsThree different strategies for emissions reductions are analysed: switching kiln technologies, improving firing practices and utilising REBs.

Investment OpportunitiesFuel-efficient brick kiln technologies, such as VSBK, can generate high rates of return through fuel cost savings and additional revenue through participation in carbon offset credit markets. Other technologies such as changes in firing practices and REBs also have the potential to provide financial and environmental returns.

Challenges and Solutions to Reducing EmissionsThere are four primary barriers to the wider use of more efficient kilns, firing process improvements and dissemination of REB technologies: informational, financial, social and institutional. The interplay of these barriers has prevented the adoption of energy-efficient technologies. Emissions reduction in the brick sector requires not only innovative financial solutions but also broad-based stakeholder engagement, both internationally and domestically.

2.4 million premature deaths can be attributed to black carbon

every year.

A

EXECUTIVE SUMMARY

1 See Annex 1

Abbreviations

BTK Bull’s Trench KilnCDM Clean Development MechanismCGB Coal-Gangue BrickCDCF World Bank Community Development

Carbon FundCER Certified Emissions ReductionFCBTK Fixed Chimney Bull’s Trench KilnGEF Global Environmental FacilityGHG Greenhouse GasIRR Internal Rate of ReturnLEED Leadership in Energy and

Environmental DesignMCBTK Movable Chimney Bull’s Trench KilnNPV Net Present ValuePEPUS Paryavaran Evam Prodyogiki Utthan SamitiREB Resource-Efficient BricksSEC Specific Energy ConsumptionSPM Suspended Particulate MatterTARA Technology and Action for

Rural DevelopmentTERI The Energy and Resources InstituteUNDP United Nations Development ProgramVER Voluntary Emissions ReductionsVSBK Vertical Shaft Brick Kiln

BrickmakingProcess

06


BRICKMAKING PROCESS

rickmaking in Asia is highly energy and Labor intensive. Traditionally, bricks are hand

moulded, laid out to dry in the sun, stacked in a kiln, fired, and then unloaded. There are many different types of kiln technologies worldwide. While the kilns

and firing practices may differ, the process of moulding and drying the bricks before

firing is the same. Due to Labor shortages and increased costs, the brickmaking industry in Asia

is transitioning towards greater mechanisation of the moulding process, despite the high capital

costs associated.

Moulding & Mechanisation

Outdoor moulding and drying is not possible during the monsoon season – typically from June to September – resulting in a limited timeframe within which brick entrepreneurs can operate. In India, moulding relies primarily on a migratory Labor force. Moulding is not a highly skilled process and as a result the workers receive minimal compensation. Itinerant Laborers often face poor working and living conditions, as well as occupational health hazards. In India, new economic development and rural job-guarantee schemes have created employment alternatives for families working in moulding.2 This has created a Labor shortage and an increase in Labor costs (Maithel et al., 2000). Some kiln entrepreneurs have responded to Labor shortages and rising Labor costs through the mechanisation of the brick moulding process.

Mechanised moulding increases brick consistency and flexibility. The moulder can adjust the clay mix, modify the brick size and shape, and create hollow or perforated bricks. Mechanisation of the moulding process also allows for the incorporation of carbonaceous biomass or fly ash into the clay mix. This contributes to emissions reductions because of coal savings. Savings in moulding Labor costs can also be realised at an early stage, despite the high upfront capital investment for mechanisation – one entrepreneur cited a 40% decrease in Labor costs.

Entrepreneurs are also looking for ways to improve the drying process; some have constructed sheds for storage. Entrepreneurs are increasingly attempting to mechanise the drying process. This requires not only high capital investments but also a constant and reliable electricity source. In India, electricity is not only intermittent but also unreliable. As a result, mechanisation requires the development and funding of off-grid generation, which also has potential GHG emissions implications.

B

The brickmaking industry in Asia is transitioning towards greater mechanisation

of moulding



07CARBON WAR ROOM RESEARCH REPORT – 2012

Firing

Firemen are responsible for monitoring and maintaining kiln temperature to efficiently fire bricks. Only a few firemen are needed per kiln, so Labor shortages are less of a constraint at this stage. Brick firing is considered a skilled profession even though most firemen are also migrant workers. In India, the Energy and Resources Institute (TERI) has begun to create an education network in conjunction with Paryavaran Evam Prodyogiki Utthan Samiti (PEPUS), a non-governmental organisation (NGO) that works at the grassroots level with migratory firemen to represent their interests when issues arise, including wage disputes and health concerns. TERI’s role has been to create a repeat technical training program that lasts two to three months and trains firemen in best practices and minimisation of risk. Thus far, 2,000-3,000 firemen have been trained and issued with technical training certificates. Certification often results in higher wages and increase worker credibility. In addition, training in best practices can increase kiln efficiency by 5-10%. These existing networks have proven effective, but it is necessary to extend these services to moulders and stackers, and to expand regionally.

Kiln Technology

With more than 300,000 kilns worldwide, there are two general categories of kiln technology: intermittent and continuous (CPCBMEF, 2007). Intermittent kilns have low energy efficiencies. After the firing process is complete, both the kiln and bricks are cooled, which releases much of the heat before the process begins again. Continuous kilns are more efficient because the heat given off during the cooling process is utilised to preheat the incoming bricks. Bricks are either moved through a stationary firing zone or remain fixed, and the heat is moved through the kiln using a chimney or a suction fan.

Figure 1: Kiln Types

Tunnel Kiln A continuous kiln in which bricks move though a stationary fire zone. As long as there is a ready and reliable source of electricity, tunnel kilns can produce a large amount of bricks at very low operational costs. These are primarily used in developed countries, as tunnel kilns are fully automated and mechanised.

BRICKMAKING PROCESS

2 The Labor shortage is related to the implementation of the Mahatma Gandhi Rural Labor Employment Guarantee Act (MGRLEGA) in 2007. The MGRLEGA aims to promote rural livelihood by guaranteeing 100 days of wage employment to rural households whose adults volunteer unskilled manual Labor.

Clamp The most common, versatile and cheap form of kiln is the clamp kiln. The production capacity of a clamp ranges anywhere from 5,000 to 500,000 bricks per firing (Maithel et al., 2012). While clamp kilns can be constructed in different shapes and sizes, they are usually built on a surface of pre-fired bricks, with firing tunnels on the bottom and green bricks stacked up to 40 layers high. As clamp kilns can only fire a limited number of bricks during each firing, many are built and operated together. Clamps do not require a permanent structure, making them extremely versatile and easy to install, maintain and operate.

However, the fuel combustion of the clamp kiln is both uncontrollable and inefficient, making it difficult to ensure the quality of bricks produced. Most are either over- or under-fired. The efficiency of clamp kilns can be improved slightly by reducing the fuel used per fired brick. Including fuel in the clay can also reduce the amount of coal and associated emissions, but this process usually requires a machine for the mixing process.

Bull’s Trench Kiln (BTK) There are two types of Bull’s Trench Kiln – fixed chimney (FCBTK) and movable chimney (MCBTK). BTKs can utilise different firing processes, which can provide significant emissions reductions. Traditionally, bricks are stacked vertically, but there are new stacking practices that provide better airflow and can reduce emissions significantly.

• Zig-Zag Stacking This consists of a long firing zone that is divided into various chambers using green bricks. While some utilise a natural draft, others use a fan to draw the fire and heat through the zig-zag stacking pattern. This firing process requires a set of highly trained and skilled workers to operate and maintain the kiln. This technology has not yet been standardised and, as a result, there is a varied performance level and emissions profile associated with switching to the zig-zag firing process. One brick entrepreneur achieved a 20-30% reduction in coal use after switching to the zig-zag stacking process. This also reduced the amount of black carbon and SPM.

Vertical Shaft Brick Kiln (VSBK) These consist of one or more shafts, with each producing approximately 135,000 bricks per month (CPCBMEF, 2007). These kilns are 20-40% more efficient than BTKs (CPCBMEF, 2007). However, transitioning from BTKs to VSBKs seems unlikely for several reasons. First, VSBKs require green bricks to be loaded at the top of the shaft, which poses an operating constraint compared to other technologies. Second, they also require a higher level of technical expertise to maximise the efficiency and output of the kiln. Third, the number of VSBKs needed to meet the same capacity of one BTK means that kiln switching on a large scale is highly unlikely unless it is during the end of lifecycle of the BTK.

CONTINUOUS

Moving firing

Bull’s Trench Kiln (BTK)

• Zig Zag

Moving Ware

• Tunnel

• Vertical Shaft Brick Kiln (VSBK)

INTERMITTENT

Clamp

INDUSTRY EMISSIONS PROFILE

sia produces approximately 1.2 trillion bricks per year. China produces 54% of the world’s bricks, followed by India at 11%, Pakistan at 8%,

and Bangladesh at 4% (Baum, 2010). However, each nation utilises a variety of different kiln technologies. For example, in China 90% of bricks are produced using Hoffman kilns. In India there are more than 60,000 clamp kilns and 3,000 BTKs (Heierli & Maithel, 2008). Since brickmaking is highly unregulated and unorganised, it is difficult to estimate brick production from each type of kiln and its associated CO2 emissions. Moreover, during the firing

process the burning of coal results in the release of numerous other pollutants into atmosphere, including, but not limited to,

carbon monoxide (CO), sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter.

CO2 Emissions

Using specific energy consumption (SEC) to estimate CO2 emissions shows that those from the top five Asian brick-producing countries total more than 359 million metric tons2, equivalent to 1.24% of total global anthropogenic CO2 emissions. Of these countries, China accounts for 65.9% of CO2 emissions and India over 16% (Figure 2).

Industry Emissions Profile

08


Carbon dioxide emissions from

the top five brick-producing countries total more than 359 million metric

tons2 During the firing

process, the burning of coal results in the release of numerous pollutants into the

atmosphere

A



09CARBON WAR ROOM RESEARCH REPORT – 2012 INDUSTRY EMISSIONS PROFILE

Based on the coal consumption of the different technologies, the CO2 emissions level of the primary kiln technologies is estimated in Figure 4.

Figure 2: Annual CO2 Emissions: Specific Energy Consumption Method

Figure 3: Coal Consumption by Kiln Type

Particulate Emissions from Different Kiln Technologies

Particulate matter emitted, such as black carbon, is the result of the incomplete combustion of coal and other fuel sources. As seen in Figure 4, VSBK produces the lowest amount of SPM vis-à-vis other technologies.

Figure 4: CO2 Emissions by Kiln

Source: Baum, 2010.

38

9658 67

171

2642 42 46

77

300

200

100

0Co

al C

on

sum

pti

on

(to

ns/

100

,00

0 b

ricks)

VSBK CLAMPTUNNEL KILN FIXED CHIMNEY(BTK) MOVEABLE CHIMNEY (BTK)

Type of Kiln

Maximum Minimum

Maximum Minimum

Emissions from Different Kiln Technologies

Coal is the primary fuel in the brickmaking process. On average, 11-70 tons of coal are needed to fire 100,000 bricks, depending on the different style and size of the kiln (Heierli & Maithel, 2008). The minimum and maximum amount of coal that is consumed by each kiln can be seen below in Figure 3.

Source: Baum, 2010.

VSBK CLAMPTUNNEL KILN FIXED CHIMNEY(BTK) MOVEABLE CHIMNEY(BTK)

16

4024 28

11 17.5 17.519

71

32

150

100

50

0Co

al C

on

sum

pti

on

(to

ns/

100

,00

0 b

ricks)

Type of Kiln

CHINA INDIA PAKISTAN BANGLADESH VIETNAM

244.1

55.839.8

19.9 10.9

250.0

200.0

150.0

100.0

50.0

0

Mil

lio

ns

of

Ton

s o

f C

O2

1.91 1.71

8

6

4

2

0CLAMP FIXED CHIMNEY (BTK)MOVEABLE CHIMNEY

(BTK)Type of Brick Kiln

Mass

Em

issi

on

s Lo

ad

(KG

of

SP

M/1

00

0 b

ricks)

Figure 5: SPM Emissions by Kiln

Source: Baum, 2010.

8.06

Key Markets

10


KEY MARKETS

he two largest brick markets in Asia are India and China. Given their market size, these

two nations have the greatest emissions reduction potential.

India

The brick sector is the third-largest industrial coal consumer in India, using 24 million tons of

coal, thereby emitting 78 million tons of CO2 annually (Development Alternatives, 2005). India’s 100,000 brick

kilns use 400 million tons of good quality topsoil each year. India faces an ongoing trade-off between development and the environment; the importance of the brick industry to its infrastructure and GDP growth is only set to increase. A recent report from the McKinsey Global Institute estimates that cities could generate 70% of net new jobs created to 2030 and produce approximately 70% of Indian GDP (Sankhe, 2010). In order to meet this urban demand, India will have to build between 700 million and 900 million square metres of residential and commercial space a year (Sankhe, 2010).

China

China dominates global brick production, representing 54% of the global market, producing a total of 700-800 billion bricks per year (Baum, 2010). Chinese brick production uses almost 100 million tons of coal per year and consumes around one billion tons of clay per year (Baum, 2010; Murray et al., 2010). Chinese brick production is characterised by use of extruders for brick forming and the use of Hoffmann and

tunnel kilns for firing of bricks for medium- and large-scale production (Heierli & Maithel,

2008). Several types of traditional kilns are used for firing bricks

in rural areas on a smaller scale, such as the more

efficient VSBK. However, Hoffman kilns produce almost 90% of all bricks in China (Baum, 2010).

China dominates global brick production, representing 54% of the

global market

T



11CARBON WAR ROOM RESEARCH REPORT – 2012 KEY MARKETS

Market Trends

12


Co-operation between government and industry is critical to incentivise uptake

of brickmaking technologies that reduce emissions


Labor

Labor scarcity is the most pressing issue facing brick kiln entrepreneurs as it directly affects the quality of bricks produced and number of workers available each season. In addition, many new kiln technologies and firing practices require the retraining of workers. For example, VSBKs and switching to zig-zag firing require a certain degree of technical knowledge and co-ordination, without which maximum efficiencies cannot be achieved. Thus, many zig-zag kilns have the same energy consumption as BTKs, negating any potential environmental benefits.

Brick Quality

In South Asia, brick quality is assessed by the sound and colour of the brick. In northern India, for example, the high-quality clay soil supports various grades of high-quality bricks, hand moulded and fired according to the traditional English red-brick style. Mechanisation is standardising brick production, which may create demand for different brick styles, including resource-efficient bricks (REBs).

There is also a widespread perception that VSBK bricks are of a lower quality than those produced by BTKs (Heierli & Maithel, 2008). As a result of the difference in soil quality, companies that produce bricks using VSBK technology find it harder to compete in northern India than in the south where, traditionally, poorer soil quality has supported only one type of lower-quality brick produced by traditional kiln technologies.

MARKET TRENDS

ven though the brick market in each nation displays different market characteristics, the Asian brick industry is particularly resistant to change because of four interconnected factors: Labor patterns, brick quality, government regulation and

land ownership rights (Figure 6). No one factor is solely responsible for the difficulties in scaling-up emissions-reducing technologies, but each one needs to be addressed in order to affect the necessary change.

In China, recent policies aim to limit the manufacture of clay bricks and encourage the use of industrial waste materials instead, in particular coal gangue. In 2006, Chinese coal-gangue brick (CGB) production reached 1.42 billion bricks. Of the 80,000 brick enterprises in China, 5,000 are engaged in CGB production. Approximately 10% of these factories use tunnel kilns, around 60% are small-scale operations producing fewer than 30 million bricks per year; 20-30% are medium-scale operations producing 30 to 100 million bricks; and the remaining large-scale factories make more than 100 million bricks (Murray et al., 2010).

Land Ownership

Rural land ownership in India is not considered sufficient collateral for bank loans to obtain the necessary financing for technology upgrades. In addition, many entrepreneurs do not own the land on which their kiln operates; this reduces motivation for kiln improvements. As a result, kiln operators not only lack incentives to switch to VSBK or other technology, but they also often lack the means.

Regulation

A lack of organised and coherent regulation thus far has made it hard to establish an efficient market for alternative kiln technologies. It is hard to achieve emissions reductions while the license to pollute remains largely unchallenged. Effective government regulation is necessary but by no means sufficient.

China is currently on the path to developing stricter regulations on brick production. In 1992, concerned with the destruction of farmland due to brickmaking, the State Council of China issued policies to strictly limit the use of solid burnt clay brick. The State Tax Bureau issued favourable tax policies to promote the development of new wall materials, which contribute to energy conservation and waste utilisation (Heierli & Maithel, 2008). The Chinese government has set a basic national policy of developing new energy-saving wall materials and reducing the production of traditional solid burnt clay bricks (Heierli & Maithel, 2008). These regulations will only be successful in reducing emissions on a large scale if they are accompanied by financing options for more efficient technologies and practices.

Future Trends

India and China have both undergone dramatic urbanisation and modernisation in addition to steady economic growth; this has resulted in a booming construction industry. Traditional building materials are increasingly less popular due to government attempts to reduce solid brick production. Steel, cement and wood are slowly replacing clay bricks as the dominant construction materials. Co-operation between government and industry is critical to incentivise uptake of different brickmaking technologies that reduce emissions.


13CARBON WAR ROOM RESEARCH REPORT – 2012 MARKET TRENDS

E

Figure 6: South Asian Brick Industry Barriers to Change

LABOR

• Declining access to cheap labor

• Demand greater than supply• Owner unable to hire

technical skils• Owner has limited knowledge of kiln

operation

BRICK QUALITY

• Dominance of traditional perceptions of brick quality• Low demand for hollow

bricks• Limited mechanization

incentives

LAND OWNERSHIP

• Low importance of land as collateral• Unclear land

ownership and tenure laws

REGULATION

• Lack of clear incentives• Informal/unregulated

industry

Reducing Emissions

14


Switching to VSBK saves 30-50%

of energy per kilogram of fired

bricks


REDUCING EMISSIONS

here are significant opportunities for lowering emissions in the brickmaking industry. This section identifies three different strategies to reduce

emissions: kiln switching, changes in firing practices, and utilising resource-efficient bricks.

Kiln Switching

Energy-efficient brick kiln technologies have lower SEC, measured in kilojoules required per kilogram of fired brick, and therefore burn less fuel and release fewer GHGs per unit of output. Reducing energy consumption can generate anywhere between a 30-60% reduction in CO2 emissions (Heierli & Maithel, 2008). Additionally, energy-efficient technologies give operators more control over the fuel combustion process, which results in a more complete combustion of carbonaceous fuel and decreased emissions of black carbon and other SPM. These technologies can provide financial returns through savings in fuel cost per unit of output.

Improving kiln efficiency depends on the choice of technology, continuous or batch operation, fuel availability, quality and preparation, firing processes and waste heat recovery systems. There are several kiln types that can reduce emissions. For example, VSBKs release less CO2 emissions per 100,000 bricks than any other proven kiln technologies (Figure 7) and reduce CO2 emissions by more than 42-77%, compared to clamps and BTKs (Development Alternatives, 2005).

Benefits of VSBK

There are four major benefits of switching to a VSBK kiln: fuel efficiency, optimal resource utilisation, lower air pollution, and social benefits. VSBK saves 30-50% of energy per kilogram of fired bricks (Maity, 2009). In addition, there are social benefits to adopting VSBK technology, such as lower accident rates for workers (Premchander et al., 2011).

VSBK has the lowest emissions intensity profile among the proven technologies and can reduce black carbon approximately ten-fold compared to other technologies (Premchander et al., 2011). In a comparison of the top five global producers of brick (presented in Figure 8), the emissions reduction potential can be as much as 64.9 millions tons of CO2. However, it is more feasible to consider a 20% or 40% replacement scenario of traditional kilns to VSBK.

Firing Process Changes

There are many different types of zig-zag firing processes that have been adopted and modified by brick kiln entrepreneurs, though no one method that has been widely disseminated.

The zig-zag firing process enables superior combustion of fuel in the firing zone and recovery of waste heat, which results in a lower consumption of fuel per output. This translates to lower CO2 and black carbon emissions. The zig-zag kiln has a higher fuel efficiency performance than most other kilns on account of three factors: it permits a better mixing of air and fuel, leading to higher combustion efficiency; it pre-heats combustion of air through heat exchange from waste gases; and it utilises the radiant heat from the furnace to raise the temperature of combustion. In addition, there are associated social benefits, including reduced black smoke and soot around working areas.

Resource Efficient Bricks (REBs)

Reductions in GHG emissions can be achieved through the use of resource-efficient bricks (REBs). One type of REB incorporates fuel into the clay mix (coal powder, boiler ash, fly ash, biomass, etc) to accelerate the firing process and reduce emissions (Premchander et al., 2011). Other types of REB include perforated or hollow bricks and bricks made of compressed fly ash that do not require firing.

Perforated and hollow bricks are of lower weight and volume and have a larger surface area. These bricks can be fired with 20% less energy while maintaining the compressive strength of solid bricks (UNDP-GEF, 2010). Perforated and hollow bricks can only be made with a semi-mechanised extrusion press; this requires a consistent source of electricity. In addition, the upfront capital costs can put technology upgrades out of reach of small-business entrepreneurs.

Figure 7: CO2 Reduction Potential of VSBK

Figure 8: Reduction Potential of Different Replacement Scenarios


15CARBON WAR ROOM RESEARCH REPORT – 2012 REDUCING EMISSIONS

T

KILN TYPE % REDUCTION IN CO2 EMISSIONS FROM VSBK INTERVENTION

Clamp 58%

MCBTK 43%

FCBTK 35%

Hoffmann Kiln 32%

COUNTRY 20% 40% 60% 80% 100%

China 23,068,616 46,137,233 69,205,849 92,274,466 115,343,082

India 3,675,901 7,351,802 11,027,703 14,703,604 18,379,505

Pakistan 2,625,644 5,251,287 7,876,931 10,502,574 13,128,218

Bangladesh 1,312,822 2,625,644 3,938,465 5,251,287 6,564,109

Vietnam 889,231 1,778,462 2,667,692 3,556,923 4,446,154

Total 31,572,214 63,144,427 94,716,641 126,288,855 157,861,068

EMISSIONS REDUCTION POTENTIAL FROM REPLACING X% OF KILNS WITH VSBK (tCO2)

Source: UNIDO, 2010.

InvestmentOpportunities

16

WWW.CARBONWARROOM.COMEVALUATING THE BRICK INDUSTRY IN SOUTH ASIA


INVESTMENT OPPORTUNITIES

his section will focus on the investment opportunities for

kiln switching: clamp to VSBK and BTK to VSBK. Despite the emissions reduction potential

of firing process changes and adoption of REBs, it is difficult

to quantify the benefits. There are substantial environmental

and social benefits from investing in emissions-reducing technologies,

despite the upfront capital costs. However, environmental benefits alone

are not sufficient incentive for brick kiln entrepreneurs to adopt clean technologies or

processes. The business and financial case for kiln switching is made below.

Clamp to VSBK

Clamps are temporary constructions that have low to zero capital costs and can be built quickly to meet a specific market demand. VSBK, on the other hand, is a fixed asset with relatively high capital cost and an average operational lifespan of 15 years. Thus, while clamps and VSBKs have similar production capacities (approximately 7,000 to 10,000 bricks per day), clamps are about three times more energy intensive than VSBK (CDM Executive Board, 2006). Kiln switching from clamps to VSBK can create large fuel cost savings; however, the lack of financial information for clamps precludes accurate analysis. Moreover, clamp owners lack access to capital and technical literacy to develop VSBK. This is an area for further research and study – specifically on the financial realities for clamp owners.

BTK to VSBK

The technical characteristics of BTKs and VSBKs are fairly similar. They are both fixed assets with high capital costs

and relatively long lifespans. The capacity of a single-shaft VSBK is approximately one third of an average

BTK (TARA, 2009). However, additional shafts can be added to the VSBK to increase capacity at decreasing marginal cost.

The financial analysis in Annex I demonstrates the incremental financial return obtainable through the replacement of BTK with energy-efficient VSBK technology. The financial parameters are

based on the Indian market, and the indicators are calculated using an annual capacity of one million

fired bricks to allow for comparability.

There are substantial environmental

and social benefits from investing in

emissions-reducing technologies

T

17CARBON WAR ROOM RESEARCH REPORT – 2012 INVESTMENT OPPORTUNITIES

Understanding Scale-up Potential The financial benefits of kiln switching from BTK to VSBK are clear. For the Indian market, the conversion of a one-million-brick-capacity BTK to a VSBK requires $6,000 in additional capital but creates more than $79,000 in additional profits. Scaling this up to the national level, the conversion of only 20% of India’s BTKs to VSBKs requires $118 million in additional capital but creates $1.55 billion in additional profits for brick entrepreneurs (Figure 10).

Figure 10: Investment Opportunity BTK to VSBK

Wealth Creation Opportunities Kiln switching has a negative marginal abatement cost. This means that the decision to build a VSBK rather than a BTK will both reduce GHG emissions and generate positive economic returns over the lifecycle of the kiln. Unlocking these environmental and economic returns requires overcoming persistent barriers and market inefficiencies, primarily access to financing. To mitigate one ton of CO2 requires investing $4.10 toward energy-efficient kiln switching. This in turn generates $53.50 in savings over the lifespan of the kiln. The environmental benefits of kiln switching are realised without investing more than the cost of the technology upgrade.

Firing Process Changes

Better feeding, firing, and operating practices can improve the overall efficiency of the kiln and decrease CO2 emissions and SPM (Jain & Singh, 2001). Efficient coal-stoking practices improve brick quality and reduce SPM in the flue gas. However, firing process improvements are difficult to quantify because each kiln has different technical specifications. In addition, alternate stacking methods, such as zig-zag stacking, can improve energy efficiency and lower fuel costs in existing BTKs.

Non-Financial Considerations

A comparison of financial returns of different brick kiln technologies also requires consideration of other factors: resource availability, tradition and location. For example, clamps are not easily comparable with industrially automated tunnel kilns because the performance characteristics, financial investment and operational requirements of the two technologies are considerably different.

Cost Savings VSBKs require approximately 41% less coal than BTKs, therefore providing significant fuel savings. The increase in efficiency for a VSBK generates annual savings of $13,895 in fuel costs. These savings are increasingly important given that the Indian wholesale coal price has tripled in recent years and is expected to continue to rise (TARA, 2009). In addition, the VSBK only requires approximately half the number of workers needed to operate the BTK, which generates additional annual savings in Labor costs of $2,900.

Simple Payback Period Within its first year of operation, the VSBK can achieve simple payback after firing approximately 1.54 million bricks for approximately 5.8 months (Figure 9). The simple payback period for a BTK is about 3.5 months longer than for a BTK due to its higher capital costs. However, the VSBK outperforms the BTK over the average 15-year lifespan of the kiln. Free cashflow analysis reveals that VSBKs deliver significantly higher returns than BTKs. The equity internal rate of return (IRR) is 82% and the net present value (NPV) is over 12,465 (Figure 9).

Figure 9: Economic Performance Comparison BTK to VSBK


Converting a one-million-

brick-capacity BTK to a VSBK requires

$6,000 in additional capital but creates more than $79,000

in additional profits

INDICATOR FCBTK VSBK

Simple Payback Period (Months) 3.5 5.8

CapEx(USD, million brick capacity)

$17,138 $23,160

Net Present Value(USD, million brick capacity)

$36,217 $115,481

Equity IRR 52% 82%

FCBTK - VSBK PENETRATION (%)

20% 40% 60% 80% 100%

New VSBKs (No)

9,074 18,148 27,222 36,396 45,370

Additional Capital Requirement (millions of USD)

$211 $423 $634 $846 $1,057

Additional Savings (present value, millions of USD)

$2,784 $5,568 $8,352 $11,136 $13,920

CO2 Emissions Reduction (tons of CO2)

3,470,431 6,940,863 10,411,294 13,881,725 17,352,156

Challenges& Solutions

18


CHALLENGES & SOLUTIONS

his report has identified three key strategies to reduce emissions in the brick kiln sector: these are kiln switching,

firing process changes and adoption of REBs. Figure 11 summarises the associated barriers and outlines the proposed solutions to enable successful

implementation of each strategy.

Each of these strategies suffers from a combination of informational, financial, social and institutional barriers

to scale-up. A lack of information prevents knowledge dissemination. High capital costs are a significant barrier

for entrepreneurs wanting to make technology upgrades. South Asia also suffers from a lack of regulatory frameworks

to support industry change. Social barriers are perhaps the most challenging to overcome because they are associated with generations of traditions and customs. It is the interplay of barriers, rather than any one in particular, that has prevented progress in this industry.

Strategy 1: Kiln Switching

One of the strategies identified to reduce emissions is through the adoption of VSBKs. Building VSBKs rather than BTKs reduces GHG emissions and generates positive economic returns over the lifecycle of the kiln. However, there are several barriers that prevent the adoption of VSBKs in the marketplace

that are identified below.

Financial Barriers

High Capital Costs VSBK technology requires high upfront capital costs per unit of output compared to BTK or clamp kilns, often making the investment out of reach to local entrepreneurs. VSBK’s lower production capacity compared to BTK means that it is better suited for small-scale brickmaking operations. Yet small-scale

entrepreneurs are even less likely to have access to financial services. Until entrepreneurs have access to financing,

kiln switching is likely to be beyond the resources of most kiln owners.

Access to Financing The dynamics of the brick industry make commercial financing problematic. Banks are hesitant to make loans to the brick industry because it is highly unregulated and unorganised. Additionally, the sector is associated with poor business practices and Labor law violations, which further impair the credibility of the brick sector (UNDP-GEF, 2010).

Bookkeeping practices in the brick industry are also insufficient for commercial lenders to make credit assessments of entrepreneurs because income and costs are not fully accounted for. For example, Labor and fuel costs are often underreported (UNDP-GEF, 2010). Furthermore, borrowers also have difficulty estimating the amount of credit that they need for a capital loan. These realities force banks to rely on reputation, rather than financial due diligence.

T


Building VSBKs rather than BTKs reduces GHG

emissions and generates positive economic returns over the lifecycle

of the kiln

Figure 11: Emissions Reduction Scenarios

Many brick kiln entrepreneurs lease their land rather than own it, which creates at least two additional problems for financing. First, entrepreneurs are less likely to invest in fixed asset improvements on property they do not own. Second, banks require land as collateral. Rural land is not considered sufficient collateral for loans, so even if entrepreneurs own their land, they need to show additional financial assets.

Many brick kiln entrepreneurs lack the financial knowledge and ability to prepare the business plans and documentation needed to apply for a loan. Furthermore, commercial banks have limited experience lending to the brick sector and do not currently offer financial instruments tailored to efficiency improvements in this sector (UNDP-GEF, 2010). This is further exacerbated by a low repayment rate of approximately 60%. These two factors increase the transaction costs, making financing cumbersome and expensive.

Financial Solutions

Carbon Financing Carbon financing could provide the necessary incentives for entrepreneurs to switch to cleaner technologies. The Clean Development Mechanism (CDM) is one of the financial instruments under the Kyoto Protocol that allows Annex 1 (developed) countries to purchase certified emissions reductions (CERs) from developing countries. There are also other financial instruments such as voluntary emissions reductions (VERs); these apply to countries that have not signed the Kyoto protocol. For example, the World Bank Community Development Carbon Fund (CDCF) is supporting Technology and Action for Rural Development (TARA) in India to disseminate VSBK on a large scale (Development Alternatives, 2005). While acknowledging the widely accepted limitations of carbon financing, this is only one potential method for established brick kiln entrepreneurs to upgrade their kiln technologies.

Loan Guarantees A loan guarantee programme can support established kiln owners in their efforts to secure financing. Loan guarantees are risk-hedging mechanisms that help mitigate the financial uncertainties from the brick industry. International financial institutions, such as the Global Environment Facility (GEF), can fund and manage a loan guarantee program for entrepreneurs that have demonstrated financial credibility.

Revolving Fund A revolving fund for energy efficiency investments in the brick sector could overcome the challenges of commercial lending. Such a fund would require initial grant money, but would become self-sufficient and self-replenishing over its operational lifetime as energy efficiency loans are dispersed and repaid with interest. A qualified and impartial fund manager would be needed to select creditworthy projects, ensure loan repayment and avoid potential conflicts of interest.

Technical Barriers

Lack of Information A lack of information makes it difficult to secure investments in alternative kiln technologies. Internationally and domestically, project developers do not have easy access to reliable data and information concerning energy consumption and emissions reduction potential. This makes comparison between different technologies challenging and therefore does not provide the necessary confidence to entrepreneurs that otherwise might consider technology switching.

Many entrepreneurs also lack the necessary technical know-how to operate more energy-efficient kilns. For example, one VSBK owner in India was encouraged to adopt VSBK technology as an experiment in conjunction with TERI but faced at least two years of severe operational difficulties. While the entrepreneur indicated a willingness to educate other entrepreneurs in the specifics of VSBK technology, it is not surprising that there is little demand. In addition, knowledge sharing in India is typically via more traditional kinship methods, with technical know-how passed most commonly from father to son. There are a handful of particularly progressive and innovative entrepreneurs but these are the exception to the norm.

19CARBON WAR ROOM RESEARCH REPORT – 2012 CHALLENGES & SOLUTIONS


• Access to Finance• High capital costs’• Technical Capacity• Perceptions/Culture

• Loan Gaurantee• Capacity Building• Carbon Financing• Mechanised Brick

Production

• Changing Labor Practices

• Trade/Labor Unions

• Microfinance• Social Enterprise• Impact Investing• Government

Procurement

• Best Practices• Standards• Labor Issues

• Access to Finance• Knowledge Sharing• Mechanization• Lack of Regulation• Culture

EMISSIONS REDUCTIONS

KNOWLEDGE SHARING SUSTAINABILITY

Kiln Switching Firing Process Resource Efficient BricksSTRATEGIES

BARRIERS TO SCALE

SOLUTIONS

GENERALSOLUTIONS

Technical Solutions

Demonstration Centres As previously discussed, switching from BTK to VSBK at scale is unlikely because of the traditional values and capacity constraints of VSBKs. However, given the significant emissions reduction potential, demonstration projects that replace BTK with large-scale VSBKs should be undertaken. This allows kiln owners to see the opportunities of VSBKs and better understand the best practices for operating them.

Capacity Building It is necessary to facilitate information sharing among all the relevant stakeholders. Capacity building through technical assistance programmes and centres can raise awareness of cleaner brick technologies, provide technical and regulatory support to kiln owners, and create bridges between kiln owners, technology providers, and financial institutions. A network of kiln entrepreneurs would serve as an information resource centre, facilitating the exchange of information between entrepreneurs. Accurate emissions data and comprehensive, actionable reports are prerequisites to better understanding the emissions profile of the brick industry.

Mechanised Brick Production In the United States, most bricks are manufactured in fully automated tunnel kilns fuelled by natural gas. As the Asian brick sector becomes more formalised and mature, brick manufacturing should move towards fully automated tunnel kilns. This will allow economies of scale and significantly reduce emissions.

Social and Cultural Barriers

Labor Shortages Labor is a critical input to brick manufacturing. Consequently, Labor shortages in India affect all brick kiln entrepreneurs. This encourages greater mechanisation, but the capital required for this transition is only accessible to large-scale entrepreneurs. In addition, the scarcity of Labor puts downward pressure on technology switching because this requires a re-education of the workforce.

Brick Perceptions There is a perception that bricks produced from VSBKs are of a lower quality than the traditional ‘red bricks’ fired since the British colonial era. Unless these perceptions can be overcome, it will be hard to encourage even the switch from clamp to VSBK, let alone BTK to VSBK. Where VSBKs have been chosen over BTKs, this is likely for specific reasons on a case-by-case basis. For example, in India one VSBK operator was previously a BTK fireman and was intellectually interested in experimenting with new technology with the help of TERI.

Strategy 2: Zig-Zag Firing

The second strategy identified to reduce emissions is to improve the energy efficiency of BTK kilns through changes in firing process, more specifically the adoption of zig-zag firing. This deserves attention because of the prevalence of BTK kilns in the marketplace. Changes in the firing process are not capital intensive and can be readily adopted. However, there are several barriers that prevent the adoption of zig-zag firing.

Social Barriers

Lack of Best Practices/Standards Where zig-zag firing is being used, it has been adapted by the specific entrepreneur and financed individually. It is not customary to patent kiln technologies or practices in India and other developing countries. As a result, there is no standardised model for zig-zag firing processes, since entrepreneurs make individual modifications to fit their kilns. More entrepreneurs would be likely to switch to this firing technique if they could be assured of its success.

Labor Currently, there are no Labor unions or associations that organise moulders and stackers. As a result, these workers face harsh Labor conditions. Most kilns only have a 20% retention rate of moulders and stackers. Even entrepreneurs that provide

improved housing and living conditions still only enjoy a 50% Labor retention rate. Without higher retention rates, brick entrepreneurs have to retrain their stackers in the zig-zag process, meaning a loss of valuable time and money. Thus, entrepreneurs that want to switch to zig-zag firing must retrain all workers each firing season. Without a dependable supply of Labor, entrepreneurs are unlikely to switch to zig-zag firing.

Social Solutions

Framework for Education and Knowledge Sharing Kiln owners utilising efficient and innovative firing practices should hold workshops to disseminate best practices. This could be aided by organisations such as TERI, but there is also a role for small independent local consulting firms to act as conveners. Third-party organisations can play a key role in conveying the environmental benefits of switching to zig-zag firing. Multi-disciplinary resource teams could offer workshops, seminars and meetings to promote capacity building on regional levels. Different levels of training should be provided to entrepreneurs and workers to acquire the skills necessary for construction and operation of zig-zag kilns.

Labor Unions Organisations are needed to register moulders and stackers, which will further formalise the brick industry. Incentives can be provided for registration, such as formalised training and certification for stacking. Brick entrepreneurs will therefore have access to a portfolio of stackers that are vetted and have a certified understanding of the zig-zag process. These Labor unions or associations can also help improve the Labor conditions for workers by assisting with contract negotiation and developing guidelines for contracts for moulders and stackers.

Strategy 3: Resource Efficient Bricks (REBs)

The final strategy identified to reduce emissions is the utilisation of resource-efficient bricks (REBs). There are a wide range of REBs, including hollow bricks, internal fuel bricks, fly ash compression bricks and others. The financing required for each type of brick is different. Hollow bricks and internal fuel bricks require capital-intensive machinery, whereas the technology for fly ash compression bricks is more affordable for small-scale entrepreneurs. In addition, Labor shortages, coupled with rising fuel prices, are spurring new interest in mechanisation of the moulding process and REBs.

Financial Barriers

Capital-Intensive Technology Financing barriers for hollow bricks and internal combustion fuel bricks requires mixers and presses. In addition, reliable electricity is required to operate these machines. Due to the capital intensity, many of the financial barriers for hollow and internal fuel bricks are the same as for kiln switching (Section 7.11).

20



Small-Scale Investments There are currently no institutions equipped to provide small-scale financing to the brick sector. Financial institutions, such as microfinance organisations and impact investors, lack knowledge of the brick industry. In addition, entrepreneurs who want to enter this market lack access to basic financial services.

Financial Solutions

Capital-Intensive Technology In addition to the solutions presented above, there are already organisations on the ground, such as the UNDP-GEF, which is implementing a multi-year project to develop a sustainable financing model for REB projects. It is important that other stakeholders contribute to the development of innovative financing solutions, specifically for REB projects.

Small-Scale Investments Microcredit organisations can play an important role in developing financial products for small-scale REB projects with attractive repayment rates. This financing structure could be particularly effective in conjunction with alternative ownership structures, such as co-operatives. A co-operative would allow a network of small-scale kiln owners to jointly invest in REB equipment. The benefits of this are two-fold. First, entrepreneurs gain access to technology otherwise beyond their financial means, and second, dividing the output equally between the kiln owners ensures shared ownership.

Impact investors should be encouraged to focus on the environmental and social benefits of REB technology and consider this industry as a new focus area. More work still needs to be done to quantify and standardise expected environmental and social returns from kiln upgrades. With enough donor interest, these schemes should be relatively easy to roll out.

Cultural Barriers

Perceptions Market acceptance of REBs is low. Consumers traditionally judge the quality of bricks by colour and a metallic ringing sound when struck. Fly ash composite bricks are grey, not red, and may be rejected by consumers due to unfamiliarity or an aesthetic preference for red bricks. Consumers may not realise that hollow and perforated bricks possess similar compressive strengths as solid bricks.

Cultural Solutions

Consumer Education Consumer education regarding the benefits of REBs can help to break down cultural prejudices, but thus far progress has been limited. One method by which REBs could become normalised in the marketplace is through government procurement. This has the potential to create significant demand for REBs and overcome the perceptions that these bricks are of an inferior quality.

General Solutions

There are several other overarching solutions that can contribute to emissions reductions in the brick sector. These require broad-based support from both international and domestic actors.

Sustainability

Brick Certification In the United States ‘green building’ has become increasingly important, and is promoted by Leadership in Energy and Environmental Design (LEED) Certification and the US Green Building Council. There are opportunities for synergies between brick production and sustainable buildings in Asia. For example, a sustainable brick certification process would allow consumers a choice in the type of bricks they

purchase, and sustainable bricks could become part of a green building certification process.

In the initial stages, sustainably certified bricks would likely fetch a higher price to cover the high capital costs of investing in environmentally efficient technology. Over time, the hope is that demand for environmentally certified bricks would push less inefficient brick producers out of the market; demand-pull incentives would feed back into priorities for brick kiln entrepreneurs. Government procurement could be one way to encourage market demand. For example, the government could mandate that a certain percentage of purchased bricks for construction must be sustainably certified. This would demonstrate government confidence in the technology. In addition, the government could provide incentives to brick entrepreneurs to fire more sustainable bricks.

The private sector can also play a role in encouraging the development of sustainable bricks. Businesses are increasingly concerned about their corporate social responsibility agendas, which include environmental sustainability. To the extent that corporations use bricks for their supply chain and operations, they should be encouraged to source them from environmentally efficient kilns. This would not only add to their environmental credentials but also save the company money over time; triple bottom-line benefits of sustainability are increasingly apparent.

‘One-for-One’ Model In order to encourage the transition to sustainable brick production and certification, innovative financing mechanisms are needed. For example, the ‘TOMS Shoes’ business model can be directly applied to the brick industry. TOMS Shoes operates on the principle that the purchase of a pair of TOMS Shoes directly translates into the provision of a pair of shoes for a child in a developing country. Applying this model to the brick industry, the purchase of sustainable building materials in the United States could contribute to a fund dedicated to helping brick kiln entrepreneurs upgrade to more environmentally efficient technology.

Knowledge Sharing

Wiki-Brick Knowledge-Sharing Platform The creation of an online networking platform called Wiki-Brick would provide a forum for brick kiln entrepreneurs, investors, NGOs and other stakeholders to share best practices, knowledge and information pertaining to regional brick sectors. The hope is that this would help address the lack of communication between relevant stakeholders and facilitate the sustainable development of this industry.


21CARBON WAR ROOM REPORT – 2012 CHALLENGES & SOLUTIONS

Conclusion

22


CONCLUSION

here is significant potential for emissions reductions in the Asian brick sector. In order to

realise this potential, it is necessary to work with stakeholders both domestically and internationally. The strategies identified in this report cannot be implemented without

broad-based support across the public and private sectors. This must include participation

from brick kiln entrepreneurs, NGOs, financial institutions and technical experts.

Many of the emissions reduction strategies identified make economic as well as environmental sense.

The sustainability challenge for the brick sector is a microcosm of the larger sustainability challenge facing the

international community: environmental efficiency generates triple bottom-line payback but initial capital investments to ‘go green’ can seem prohibitively high. This is complicated in the Asian brick sector by the interplay of developing-world realities, including a lack of access to financing, entrenched cultural attitudes that inform this traditional industry, informal industry organisation and lack of access to technological know-how and best practices. The key to solving this seemingly inexorable set of challenges is to address emissions reductions in the brick sector as a business and economic opportunity. In this instance, there need be no necessary trade-off between development and the environment.

T

The key is to address emissions

reductions in the brick industry as a

business and economic opportunity



23CARBON WAR ROOM RESEARCH REPORT – 2012 CONCLUSION

Works Cited

Baron, Robert E. W, et al., 2009. “An Analysis of Black Carbon Mitigation as a Response to Climate Change.” Copenhagen Consensus Center.

Baum, Ellen. 2010. “Black Carbon from Brick Kilns.” Paper presented to the Clean Air Taskforce, April 7.

CDM Executive Board. 2006. “India Vertical Shaft Brick Kiln Cluster Project.” CDM-SSC-PDD.

CPCBMEF. 2007. “Industry Document with Emissions Standards, Guidelines and Stack Height Regulation for Vertical Brick Kilns.”

Development Alternatives. 2005. “A Guidance Document for Entrepreneurs and Project Auditors.”

Environment Systems Branch Development Alternatives. 2005. “Environmental & Social Report for VSBK: A Guidance Document for Entrepreneurs and Project Auditors.”

The Energy and Resources Institute (TERI). 2011. “Approach Paper on Market for Resource Efficient Brick Products.”

Heierli, Urs, and Maithel, Sameer. 2008. “Brick by Brick: The Herculean Task of Cleaning of the Asian Brick Industry.”

Jain, Sunil, and Singh, Pritpal. 2001. “Manual on Better Feeding, Firing and Operating Practices in Bull’s Trench Kilns.” Punjab State Council for Science & Technology.

Kroeger, Timm. 2010. “Black Carbon Emissions in Asia: Sources, Impacts, and Abatement Opportunities.” United States Agency for International Development.

24


Maithel, Sameer, et al., 1999. “Energy Conservation and Pollution Control in Brick

Kilns.” New Delhi: Tata Energy Research Institute.

Maithel, Sameer, et al., 2000. “Experiences in Transfer and Diffusion of Efficient Technologies in

Indian Brick Industry.” Paper presented at the 2nd CTI/Industry Joint Seminar on Technology Diffusion

in Asia and Pacific, 2000.

Maithel, Sameer, et al., 2012. “Brick Kilns Performance Assessment and a Roadmap for Cleaner Brick

Production in India.”

Maity, Soumen. 2009. “Cleaner Brick Production Practices – India. Technology and Action for Rural Advancement.”

Murray, Robin, et al., 2010. “Clean Development Mechanism Evaluation Study – Adoption of Heat Revocery Power Generation within the Chinese Coal-Gangue Brick Sector.” Camco, Climate Change Solutions. Final Report: March 30.

Premchander, Smita, et al., 2011. “External Review of Clean Building Technologies for Nepal Vsbp-Cesef Project 2008-2011.” Swiss Agency for Development and Cooperation.

Reeve, D.J. 2011. “Habla Kilns: Will the ‘Real Habla Kiln’ Stand Up!!” Kathmandu, Nepal: United National Environment Programme Consultation on Black Carbon Mitigation.

Sankhe, S. 2010. “India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth.”

Technology and Action for Rural Development (TARA). 2009. “Comparative Chart for Brick Firing Technologies.”

United Nations Development Programme – Global Environment Facility (UNDP-GEF). 2010. “Energy Efficiency Improvements in the Indian Brick Industry – Project Document.”

United Nations Industrial Development Organization (UNIDO). 2010. “Global Industrial Energy Efficiency Benchmarking: An Energy Policy Tool.”

Varanasi Brick Cluster. 2010. “Detailed Project Report on Technology Upgrading from Straight Line to Zigzag Firing.” Bureau of Energy Efficiency.



25CARBON WAR ROOM RESEARCH REPORT – 2012 ANNEX 1

ANNEX I: FINANCIAL ANALYSIS OF KILN SWITCHING FROM BTK TO VSBKThe following section presents the findings from a financial analysis of BTK to VSBK kiln switching. Financial indicators are levelised to a capacity of one million bricks in order to aid in comparability.

Specific Energy Consumption

Production Capacity

Fuel Consumption Per Year

KILN LOW HIGH

Clamp 2 4.5

MCBTK 1.8 4.5

FCBTK 1.8 1.8

Hoffmann Kiln 1.2 1.5

VSBK 0.7 1

KILN BTK VSBK

Daily Production (bricks) 30,000 10,000

No. of Firing Days per year 180 240

Total Annual Production of Fired Bricks 5,400,000 2,400,000

Class I bricks 80% 90%

Saving in good bricks

Total Daily Class I Bricks 24,000 9,000

Total Annual Class I Bricks 4,320,000 2,160,000

Selling price of Class I Bricks (USD/Brick)

$ 0.036 $ 0.036

Annual Revenue from Sale of Class I Bricks (USD/year)

$ 154,907 $ 77,453

KILN BTK VSBK

Coal consumption (tons/mm fired bricks)

140 80

Coal Price (USD/ton of coal) $ 90 $ 90

Coal Price (USD/mm fired bricks) $ 12,606 $ 7,204

Coal Price (USD/fired brick) $ 0.013 $ 0.007

Daily Coal Costs (USD) $ 378 $ 72

Annual Coal Costs (USD) $ 68,074 $ 17,289

Annual Coal Saving (USD/million bricks/year)

$ - $ 50,786

SPECIFIC ENERGY CONSUMPTION (MJ/KG) FIRED BRICK

(UNIDO, 2010)

(TARA, 2009)

(TARA, 2009)

Labor

Operating Margin

Capital Expense

KILN BTK VSBK

Skilled workforce Yes Yes

Moulding Family 45 12

Firing Crew 8 4

Loaders/Unloaders 20 5

Labor Cost (USD/year) $ 65,033 $ 29,015

KILN BTK VSBK

Operating Margin (USD/brick) $ 0.02 $ 0.03

Operating Margin (USD/mm bricks)

$ 23,252 $ 28,654

Daily Operating Margin (USD/kiln/day)

$ 698 $ 287

Annual Operating Margin (USD/kiln/year)

$ 86,833 $ 60,165

KILN BTK VSBK

Total CapEx (USD) $ 74,037 $ 50,025

Financial Indicators

KILN BTK VSBK

Simple Payback (No. of Bricks Sold)

3,184,165 1,745,810

Simple Payback Period (Months) 3.49 5.74

Debt Service Coverage Ratio (Avg.) 4.38 9.28

Debt Service Coverage Ratio (Min.) 3.08 5.08

Project IRR (Unlevered) 77% 118%

Equity IRR 52% 82%

NPV (USD) $ 156,459 $ 249,439

(TARA, 2009)

26


EVALUATING THE BRICK INDUSTRY IN SOUTH ASIA NOTES

ABOUT THE CARBON WAR ROOM

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Acknowledgements

The Carbon War Room Research and Intelligence Group, and the Johns Hopkins SAIS Practicum Team would like to thank the following individuals for their support and contributions to this research:

Deborah Bleviss (SAIS), Dr. Heather Eves (SAIS), Dr. Jonathan Haskett (SAIS), Margel Highet (SAIS), Dr. David Jhirad (SAIS), Sachin Kumar (TERI), Dr. Padu S. Padmanaban (USAID & SAIS) Girish Sethi (TERI), N. Vasudevan (TERI).

Special Thanks to the Energy and Resources Institute for their generous support.

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